The next earnings season is set to start next week when the biggest U.S. banks start to report second-quarter earnings results. JPMorgan Chase (JPM) will get things started when it reports on Tuesday, July 13. Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) will all report on Wednesday, July 14.

On a year-to-date basis, the financial sector has been one of the top performers in the first half of 2021. Using the Select Sector SPDRs as a barometer, the energy sector gained 45% through the end of June and the financial sector rallied 25.5%. Those were the top two performances from the main sectors.

One thing that has benefitted the financial sector is the Fed expressing concerns about inflation and the possibility of rate hikes coming within the next year and a half. When interest rates rise, it helps banks as it increases the spread between lending rates and deposit rates. Investors have definitely kept that in mind as they have pushed bank stocks higher.

Second-quarter results should be interesting as they will likely blow past Q2 2020 results, but they are likely to lag Q1 2021 results. I put together the following table showing the current EPS estimates for the four banks and how the estimate compares to Q1 results and last year’s results.

The second quarter of 2020 was a rough one for most businesses with the economy shut down due to the pandemic and big banks were no exception. This is the reason for the low comps from last year and why this year’s results are so much higher. Of course, there were extenuating circumstances in the first quarter as the government was sending out stimulus checks and now Q2’s results are expected to come in below Q1’s results.

If we look at Tickeron’s Scorecard, we see some very different ratings for the banks. Bank of America is getting a “strong buy” rating at this time while JPMorgan Chase has a “buy” rating. Citigroup and Wells Fargo are both getting “sell” ratings at this time. Something to keep in mind about Tickeron’s rating system is that it is based on Artificial Intelligence and the weighting of a number of different fundamental and technical indicators.

(Click on image to enlarge)

Looking at the overall fundamental and technical scores we see that Bank of America has four positive marks and two negative marks on the fundamental side. The company has bullish signals from five indicators and only one bearish signal. JPMorgan Chase also gets bullish signals from five technical indicators and one bearish signal, but its fundamental ratings show two positive and two negative.

If we break down the fundamental ratings, all four companies get positive marks in the Outlook Rating and all four get negative marks in the SMR Ratings. Wells Fargo only has two positive marks and it has four negative marks.

(Click on image to enlarge)

In order to look for any big discrepancies in the numbers of the four banks, I made a spreadsheet with the EPS change last quarter and for the last three years. The spreadsheet also had the sale growth rates for the most recent quarter and for the last three years, and the ROE and profit margins for each stock. BAC, Citi, and JPMorgan all saw earnings grow by huge rates in the first quarter while Wells only saw EPS growth of 77%. While that seems like a pretty good growth rate, JPMorgan’s was 324%, Citi’s was 242%, and BAC’s was 115%.

Wells also stood out in a negative way on the 3-year EPS growth rate. Earnings have declined by an average of 32% over the last three years. The others have seen modest declines and JPMorgan saw a modest growth rate. Wells has the lowest ROE and the smallest profit margin. JPMorgan has the highest ROE and the highest profit margin.

Charts and Sentiment Very Similar Across the Board

Turning our attention to the other analysis styles, I was amazed at how similar the charts and the sentiment indicators are for all four of the banks we’re looking at. On the weekly charts, all four stocks are below their 13-week moving averages and above the 52-week moving averages. The overbought/oversold indicators are also similar with the exception of Citigroup. Citi’s weekly stochastic indicators are down near oversold territory while the other three all have readings in the 40-60 range.

On the sentiment side, all four stocks have short interest ratios in the 1.6 to 1.8 range. The average short interest ratio falls in the 3.0 range, so these banks have lower ratios than the average stock. This indicates slightly more optimism toward the stocks.

BAC, Citi, and JPMorgan also have very similar analysts’ ratings. They all have between 24-26 analysts covering them and they all have buy percentages between 65.4% and 68%. The buy percentage measures the number of buy ratings as a percentage of the total ratings. Wells Fargo is once again a bit of an outlier here with a buy percentage of only 56%. The company has 25 analysts following it with 14 “buy” ratings and 11 “hold” ratings. The average buy percentage falls in the 65% to 75% range.

The Overall Outlook

Obviously, there is a high correlation in these four stocks and how they move. We also see that the fundamental, technical, and sentiment analysis for the four banks are similar in many ways. On the fundamental side, Bank of America and JPMorgan Chase seem to be a little better than Citi and quite a bit better than Wells Fargo. The only real outlier on the technical side is that Citi’s stochastic indicators are near oversold levels after the stock fell in four of the last five weeks.

The sentiment indicators are similar with Wells Fargo seeing a little more pessimism than the others, but considering the fundamentals it should have more pessimism or less optimism toward it.

Looking at the earnings announcements in the last three quarters there has been a clear pattern. The four banks in question have tended to trend lower after the last three earnings reports for all four companies. The only time we saw one of the stocks trend higher in the days following an earnings report was in April. Wells Fargo moved higher for a week or two after it reported. In the other 11 instances the stocks trended lower for a week or two before reversing higher.

I wouldn’t be surprised to see a similar pattern this time around. Expectations are pretty high and that generally makes it harder to impress investors. Disappointed investors tend to wash out and sell in the immediate days following the announcement and that seems to be what has happened in recent quarters.